A leading member of Germany's Jewish community has accused the government of failing to control rightwing extremism following an attack on a group of Indian men in an eastern town. Stephan Kramer, the general secretary of the Central Council of Jews said that until a nationwide action plan was launched to tackle the problem, attacks on minorities would only get worse.

His remarks followed a brutal attack on eight Indians in the town of Mügeln, near Leipzig, at the weekend. During a town festival the men were chased through the streets by around 50 young Germans, who hurled abuse at them, including the taunt "foreigners out". All of the men were beaten up, one of them seriously. "Yesterday it was coloured people, today it's foreigners, tomorrow it'll be homosexuals and lesbians and maybe Jews," Mr Kramer told the German daily newspaper Taz.

Prior to the Mügeln incident, police had been braced for trouble in certain east German towns as rightwing extremists commemorated the anniversary of the death of Adolf Hitler's deputy, Rudolf Hess.

Mr Kramer said that parts of former communist eastern Germany were "no-go" areas, which people who looked foreign should be warned against visiting. He accused the government of "delivering the same sentiments" every time there was an attack, but failing to produce results with its anti-extremist strategy. "This isn't hysteria," he said. "This is the bitter truth."

The German chancellor, Angela Merkel, condemned the attacks and pledged to put the issue high on the agenda at a strategy meeting of her grand coalition taking place today and tomorrow. "It is not acceptable for people in German cities to be chased through the streets and beaten," she said through her spokesman, Thomas Steg.

There is increasing evidence to suggest that the frequency of far-right attacks is having a detrimental effect on the ability of parts of eastern Germany to attract foreign investment and tourism. "These no-go areas - so-called foreigner-free zones - really exist and non-Aryans know why they don't go there," an expert on rightwing extremism, Anetta Kahane, said. "The fact is that many American or Asian firms that have a mix of employees don't come to east Germany."

The Mügeln incident came almost exactly 15 years after a far-right attack on a home for asylum seekers near Rostock, in which 120 people narrowly escaped death. That attack led to a political outcry and closer monitoring of far-right activities.

Yesterday prosecutors said they were investigating two men from Mügeln, aged 21 and 23, for being behind the recent attack and were looking at charging them for breaching the peace. The town's mayor, Gotthard Deuse, drew criticism after insisting that those who assaulted the Indians were not locals and that the area did not have a far-right problem.